Fixed income falls out of favour as IFAs seek returns

Fewer independent financial advisors expect to be investing in fixed incomes in the coming year, according to new research from Legal & General Investments, one of the UK's largest investment providers.

Fixed income saw the biggest drop, from 52% of IFAs who currently invest in the asset class, falling to just 27% who expect to invest across the coming year, its What Matters Investment Index shows.

Although the fall in appetite for fixed income was the most significant, no asset class has seen an increased appetite to invest, it also shows. 

Overall there seems to be considerable uncertainty, probably due to market volatility, with one in 10 IFAs saying that they don't know which asset class to invest in over the next 12 months.

The full results show that while 92% of IFAs currently invest in Equities only 77% plan to do so, a fall of 15%. Currently 52% are investing in Fixed Income but only 27% intend to do so in the next 12 months, a drop of 25%.  Property sees a similar drop, with 44% investing currently and only 24% intending to do so, a fall of 20%.

Multi Assets are still popular with 50% investing at present and 42% intending to do so, a drop of 8%, while Multi Manager funds currently have 36% investing and 32% intending to do so, a drop of 5%. Currently only 2% are unsure about what to invest in but 10% say they don’t know what to invest in over the coming 12 months, a rise of 8%.

‘The What Matters Investment Index clearly shows the level of uncertainty that even financial advisers are experiencing. Having secured strong returns in recent times, investors are now becoming more bearish about the coming months and are perhaps positioning some of their holdings in cash,’ said Simon Ellis, managing director, Legal & General Investments.

‘There is a great deal of indecision across asset class choice, performance expectations and investment patterns at present. It is no surprise that investors have been re-evaluating their portfolios with a view to repositioning their investments. The key is to diversify intelligently, which may explain why multi manager funds have become so popular over the last few years,’ he added.